Student loan - Pay off Plan 2?

m4matteo

Hello All,

I've been looking at my student loan payments again recently and hadn't realised about the interest changes and am now seriously considering paying off my Plan 2, and am looking for advise.

Plan 1 (4.3%) - £5600 left (which has gone up from £5530 last year but I assume because more is going to the higher interest plan 2)

Plan 2 (7.3%) - £12600 left (down from £15034 last year)

Total left to pay about £18250, and collectively came down about £2300 this year 
Both plans wouldn't wipe until I'm 65 from what I can see, so that's not really a consideration.

I earn around £70k and am 44yrs old. So it looks highly likely I will pay plan 2 or both off before I get to retirement. So from what I understand it's worth considering paying it off because of this? Especially as the interest rate is 7.3% on plan 2, surely if I just add it to the mortgage instead it would drop to 4.5% instead right?

This being said I still have a heft mortgage left to pay, £225k on a £370k value house, and no saving at the minute.

Is this train of thought correct? Should I just leave it? Thoughts would be welcome

Regards

Ed-1

m4matteo said:

Hello All,

I've been looking at my student loan payments again recently and hadn't realised about the interest changes and am now seriously considering paying off my Plan 2, and am looking for advise.

Plan 1 (4.3%) - £5600 left (which has gone up from £5530 last year but I assume because more is going to the higher interest plan 2)

Plan 2 (7.3%) - £12600 left (down from £15034 last year)

Total left to pay about £18250, and collectively came down about £2300 this year 
Both plans wouldn't wipe until I'm 65 from what I can see, so that's not really a consideration.

I earn around £70k and am 44yrs old. So it looks highly likely I will pay plan 2 or both off before I get to retirement. So from what I understand it's worth considering paying it off because of this? Especially as the interest rate is 7.3% on plan 2, surely if I just add it to the mortgage instead it would drop to 4.5% instead right?

This being said I still have a heft mortgage left to pay, £225k on a £370k value house, and no saving at the minute.

Is this train of thought correct? Should I just leave it? Thoughts would be welcome

Regards

Plan 2 wipes after 30 years, although no repayments are due in retirement if not earning over the threshold.

m4matteo

Ed-1 said:

m4matteo said:

Hello All,

I've been looking at my student loan payments again recently and hadn't realised about the interest changes and am now seriously considering paying off my Plan 2, and am looking for advise.

Plan 1 (4.3%) - £5600 left (which has gone up from £5530 last year but I assume because more is going to the higher interest plan 2)

Plan 2 (7.3%) - £12600 left (down from £15034 last year)

Total left to pay about £18250, and collectively came down about £2300 this year 
Both plans wouldn't wipe until I'm 65 from what I can see, so that's not really a consideration.

I earn around £70k and am 44yrs old. So it looks highly likely I will pay plan 2 or both off before I get to retirement. So from what I understand it's worth considering paying it off because of this? Especially as the interest rate is 7.3% on plan 2, surely if I just add it to the mortgage instead it would drop to 4.5% instead right?

This being said I still have a heft mortgage left to pay, £225k on a £370k value house, and no saving at the minute.

Is this train of thought correct? Should I just leave it? Thoughts would be welcome

Regards

Plan 2 wipes after 30 years, although no repayments are due in retirement if not earning over the threshold.

I didn't take this plan out until mid 30s, hence wont wipe really

silvercar

No savings at the moment would concern me. As would adding it to the mortgage, you are swapping unsecured debt for secured debt and your home is at risk.

So my input would be to make some rainy day savings as a first step. Then consider the best use of the money that you are considering to use to clear the student loan - would a pension contribution be a better use of the money? Do you intend moving home at any point in the future and the money could help with a deposit or stamp duty? Only then would I consider repaying some of the loan.